RBA member: fix two-speed economy

Reserve Bank board member
Roger Corbett
has urged the Gillard government to act on the challenges of the “bipolar economy" as political pressure mounts for a crackdown on the major banks to ease cost-of-living pressures for home owners.

Mr Corbett’s warning came as business groups linked the row over banking competition to the broader debate over economic growth, stepping up calls for regulation to curb the market power of the big banks.

Shadow treasurer
Joe Hockey
gained support yesterday for legislation to give the competition regulator new powers to prosecute price signalling between executives, putting the government on the defensive over its own reform plan.

Mr Hockey brought forward the Coalition plan in order to ensure a parliamentary debate in the fortnight beginning November 15, weeks before Treasurer
Wayne Swan
is due to announce his plan.

The Council of Small Business Organisations of Australia (COSBOA) has strongly criticised the banks for making it too expensive for companies to gain finance, while the Australian Chamber of Commerce and Industry yesterday welcomed plans to increase competition among lenders.

Mr Corbett, who is also chairman of Australian Financial Review publisher Fairfax Media, said the government needed to act on the problems caused by the surging growth in the mining states and the slower performance in the non-mining states.

“It’s immensely important that the fiscal questions of the bi-polar economy, in other words the booming conditions in Western Australia and Queensland and difficult situations in some parts of NSW and Victoria, are addressed by the federal government," he told Dow Jones Newswires.

The Australian consumer association, Choice, launched a campaign against the banks yesterday as politicians from all sides promised action.

Related Quotes

Company Profile

Mr Hockey did not release the details of his private member’s bill but it is expected to amend trade practices law so that the Australian Competition and Consumer Commission could prosecute executives for any private and public statements that had the “effect or purpose" of lessening competition.

“We are doing this because the government is not acting. If the government is not prepared to take action to have more competition in banking, we will," Mr Hockey said.

Independent MP Bob Katter expressed doubts that the ACCC would be willing to prosecute but backed the Coalition move.

“I’ll be backing Hockey very strongly – at least he is sending a signal to the banks that while the action might be extremely mild, and most of it’s all moral suasion, if it doesn’t work we might move on [to other measures]," Mr Katter said.

NSW independent
Tony Windsor
expressed scepticism about the bill while his colleague
Rob Oakeshott
reserved judgement. Tasmanian independent
Andrew Wilkie
said he would support any sensible reform to rein in the banks. “However, I would have concerns if the scope of Joe Hockey’s bill is only to do with the power of the ACCC because genuine reform obviously demands much broader action," he said.

Independent senator
Nick Xenophon
said he would support any move to strengthen the powers of the ACCC to better regulate the banking sector and hoped the ACCC would use any new powers it might be granted.

Greens MP
Adam Bandt
is preparing to move ahead of the Coalition by introducing a bill on November 15 to abolish $2 fees at automated teller machines, require banks to provide fee-free accounts and require them to offer simple mortgage loans that adjust interest rates in line with movements by the Reserve Bank.

“It’s the first test of the major parties’ willingness to put their money where their mouths are," he said of the bill, similar to one already proposed by Greens leader Bob Brown in the upper house. Mr Bandt already has approval to introduce his bill on November 15, but Mr Hockey must seek committee approval to introduce his bill the following Monday.

The Greens are to meet Mr Hockey in the next 10 days to consider joining forces on the issue.

Mr Swan emphasised the importance of his plan for the banks by terming it a “new wave of reform" for the sector. “We are determined to put that in place but it must be done in a careful, methodical way," he told reporters during a visit to China.

“It must be done in a careful, methodical way because our financial system goes to the very core of our economic prosperity."